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DraftKings (NASDAQ:DKNG) is moving further into the cryptocurrency space, announcing today it will stake digital assets to support the Polygon blockchain network. But shares of the gaming company are sliding due to an analyst downgrade.
Today, the Boston-based online sportsbook operator said it’s partnering with Zero Hash to stake digital assets it holds in its treasury to support the Polygon (MATIC) blockchain network.
With this collaboration, DraftKings is optimizing its working capital and liquidity as it operates a validator node that contributes to Polygon’s governance and network security,” according to a statement issued by the gaming company.
DraftKings announced a partnership with Polygon last October. The digital coin — the 16th-largest by market value — supports transactions on DraftKings Marketplace. That’s the gaming company’s non-fungible token (NFT) unit.
DraftKings’ Polygon announcement is part of the company’s wider Web3 initiative and potentially a sign of long-term plans to become more of a fintech firm than just a pure-play gaming operator.
However admirable those plans may be, they are long-ranging. For today, investors aren’t impressed, as DraftKings’ stock remains mired in a lengthy slump. In midday trading, it’s down more than 10% after Argus analyst John Stazak downgraded the stock to “hold” from “buy.”
“DKNG is facing fierce competition from MGM and Wynn, which are expanding their online sports betting operations, and in our view needs to strengthen its marketing efforts. We also expect revenue growth to slow in 2022, as fewer states approve online sports betting,” he said in a note to clients.
Stazak adds he doesn’t expect DraftKings will notch a profitable quarter until the July through September period of 2023. Argus doesn’t assign a price target to the stock, which was down 24.68 percent year-to-date entering today.
DraftKings Sportsbook is currently available in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, and Wyoming.
Last year, CEO Jason Robins said he’d like his company to accept crypto as a form of payment for online casinos and sports betting. But state regulators currently don’t permit that. He’s broadly bullish on crypto, noting the asset class will “likely transform some entire industries and portions of others.”
An increasing number of companies are holding bitcoin, the largest digital asset, on their balance sheet. Regarding Polygon becoming a bigger contributor to the DraftKings investment thesis, that’s possible down the road if the adoption and usage cases for the digital token expand.
“Polygon is the fastest growing blockchain with high speed and low gas infrastructure. DeFi bluechip dApps including Sushiswap, Curve, Aave, Balancer, Kyber have all integrated Polygon,” according to DraftKings.
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